How to Select the Right Entity Type for My Business?
When starting a business, one of the crucial decisions is determining the appropriate form of business entity to establish. Common options include sole proprietorship, partnership, limited liability company (LLC), and corporation. The process begins with selecting a name for your company and proceeds with completing an organizational document that lists officers, appoints agents, establishes corporate records, creates bylaws or operation agreements, appoints directors, and may involve issuing stock or membership interests based on the chosen entity. Additionally, considerations such as tax and liability laws, insurance requirements, copyright and trademark laws, and more will impact your choices for both the name and entity structure. Our experienced business lawyers possess comprehensive knowledge of these complexities and can assist you in realizing your entrepreneurial aspirations. Our clientele includes individuals, small businesses, entrepreneurs, creative artists, and inventors.
Whatever your corporate service needs, our business attorneys possess the talent, resources, and expertise to meet them efficiently, promptly, and cost-effectively.
Types of Business Entities
Several business entity types are available for consideration when initiating your business venture. Additionally, tax and liability laws, insurance requirements, and copyright and trademark laws should be taken into account. Our business lawyers understand the intricate nature of this process and can provide guidance to help you make an informed decision. Here are a few entity types to consider:
Sole Proprietorship:
A sole proprietorship involves an individual owning an unincorporated business. It offers advantages such as ease of establishment and sole ownership control over the business by the proprietor.
General Partnership:
A general partnership is a relationship between two or more individuals who come together to conduct a trade or business. It is relatively simple to create, and each partner reports their share of profits or losses on their personal income tax return. However, all partners are jointly liable for the debts and obligations of the partnership.
Limited Partnership:
A limited partnership involves a relationship between two or more individuals who collaborate to run a trade or business. It must have at least one general partner with unlimited liability and one or more limited partners whose liability is limited to their investment amount.
Limited Liability Company (LLC):
A Limited Liability Company (LLC) is a business structure authorized by state statutes. Each state may have different regulations, so it's essential to check with your state's requirements. LLCs offer the advantage of flexible participation, with no restrictions on the number of members, and taxation is passed through to the members. LLC owners enjoy limited personal liability for the company's debts.
S Corporation:
S Corporations elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes.
Non-Profit Corporation or 501(c)(3) Corporation:
A non-profit organization, specifically a 501(c)(3) not-for-profit corporation, operates under federal law to advance a social cause or promote a shared perspective. Benefits of a 501(c)(3) include federal tax exemption, exemption from federal unemployment tax, and the ability to make tax-deductible contributions to charities.